1. A stock dividend will

A. increase the total value of stockholders' equity.

B. result in an inevitable increase in the stock's market value.

C. decrease the amount of cash available to the corporation.

D. not by itself increase shareholder value.

2. The reason that cash flows, not accounting income, are used in capital budgeting is because

A. cash rather than income is used to make new investments.

B. value is determined on the basis of projected cash flow.

C. depreciation on the new investment has cash flow implications.

D. all of the above.

3. The primary reason for a corporation to engage in a stock split is to

A. indicate its unexpectedly low earnings per share.

B. make a stock dividend payment to shareholders.

C. assist in the takeover of another firm.

D. lower the stock price to a more popular trading range.

4. Which of the following will affect a company's dividend policy?

A. The amount of new investment projects available.

B. The preferences for dividends or capital gains of its shareholders.

C. Legal rules concerning the protection of the firm's capital.

D. All of the above.